Definition of a Partnership
A partnership involves two or more people going in together to share ownership in a single business. Most of the time, each business partner is bringing something into the partnership such as money, property or even sweat equity.
Main Types of Partnerships
This type of partnership usually involves parties having equal ownership percentages in the company and sharing everything from profits and management to liabilities. In a general partnership the partners are usually jointly and severally liable for the acts of the partnership, including all its obligations. If the partnership items are not shared equally, then typically you need a partnership agreement and use of another type of ownership vehicle may be warranted.
A Limited Partnership is a little more complex than a general business partnership. In a limited partnership the business ownership is generally not split evenly. There is typically a general partner, who has overall responsibility and liability for the acts of the partnership, and limited partners, who are considered to have limited liability and with it typically less control over the partnership’s day-to-day affairs. With a limited partnership, a written partnership agreement is a necessity in order to specifically identify which partners are limited and which are general partners in the entity.
A joint venture is often considered a type of partnership and it is typically where two or more parties come together for a limited time or for a specific project or purpose. The venture may either be a general or a limited partnership or may operate as a limited liability company (LLC) that is treated like a partnership.
Limited Liability Company
A limited liability company (LLC) is not a traditional partnership but is often viewed as a cross between a general partnership and a limited partnership because the members or owners of the LLC typically share limited liability like limited partners, but also can have varying degrees of management and control rights like a general partner. LLC members can also have differing ownership and profit percentages. Typically, with an LLC you need a written agreement referred to as an operating agreement in order to spell out the rights, roles and responsibilities of the owners.
Why Hire an Attorney
In order to form a general partnership, you do not necessarily need to register your business with the State. If you intend to operate as a general partnership, then no written agreement is required at all. However, one is recommended just to ensure the parties all understand the business deal. In the case of a limited partnership or a limited liability company, you are required to register your business with the State. There are many other things that may be needed to establish a business such as the business name, licenses and permits, registering for a tax ID, and more. Also if you plan to hire employees then you have to make sure your compliant with state and federal regulations.
An attorney can help make sure you go through all the proper steps to start your business partnership. Not only will they help guide you through the process but they will also make sure you are covered legally. They can help provide an enormous amount of legal advice and help with any formal contracts that need to be prepared.
Contact one of our Attorneys before you start the process of becoming a Partnership. Our Attorneys are experienced with all the stages involved with business formation and can assist you with choosing the entity that is right for you.